June 5, 1992
TO: STATE SECURITIES MEMBERS NO. 29-92
RE: INDIANA TO APPLY CALIFORNIA EXPENSE LIMITATION
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As we previously advised you, the Indiana Securities
Division has been applying the expense limitation contained in
the Central Securities Administrators Council Statement of Policy
on Open-End Investment Companies ("CSAC Guidelines") which limits
the expenses of a fund to 1.5% of net assets up to $30 million
and 1% of any additional assets. (See Memorandum to State
Securities Members No. 26-92, dated May 26, 1992.)
We are pleased to inform you that based upon the
Institute’s efforts, the staff of the Indiana Securities Division
will no longer apply the expense limitation contained in the CSAC
Guidelines.
However, the staff will apply the California expense
limitation. As you may recall, in 1989 the California Department
of Corporations increased the annual expense limitation
percentage caps to 2.5% of the first $30 million of the average
net assets of the fund, 2% of the next $70 million and 1.5% of
the remaining average net assets. Moreover, for purposes of
calculating the expense limitation, a portion of a fund’s annual
distribution plan expenses (12b-1 fees) may be excluded under the
California rule. A fund may exclude all 12b-1 fees up to 1% of
its average net assets if sales charges are not collected at the
time of the sale of shares. In addition, if the fund has a
front-end load, the fund may exclude part or all of the 12b-1
fee, depending on the amount of the 12b-1 fee.
The Institute will continue to work with the Indiana
Securities Division on repeal or suspension of the remainder of
the CSAC Guidelines. We will keep you advised of developments.
Patricia Louie
Assistant Counsel